DEFINITION of Executor
An executor is an individual appointed to administer the estate of a deceased person. The executor's main duty is to carry out the instructions and wishes of the deceased. The executor is appointed either by the testator of the will (the individual who makes the will), or by a court, in cases wherein there was no prior appointment.
BREAKING DOWN Executor
The executor is responsible for making sure all assets in the will are accounted for, along with transferring these assets to the correct party (parties). Assets can include financial holdings, such as stocks, bonds, or money market investments; real estate; direct investments; or even collectibles like are. The executor has to estimate the value of the estate by using either the date of death value or the alternative valuation date, as provided in the Internal Revenue Code (IRC).
The executor also needs to ensure that all the debts of the deceased are paid off, including any taxes. The executor is legally obligated to meet the wishes of the deceased and act in the interest of the deceased. The executor can be almost anyone but is usually a lawyer, accountant or family member, with the only restriction being that he or she must be over the age of 18 and have no prior felony convictions.
Executor and Estate Planning
Executors are key in estate planning for individuals and their families and beneficiaries. Estate planning is an all-encompassing term that covers how an individual’s assets will be preserved, managed, and distributed after death. It also takes into account the management of this individual’s properties and financial obligations (i.e. debts) in the event that s/he becomes incapacitated.
Individuals have various reasons for planning an estate, including preserving family wealth, providing for surviving spouses and children, funding children and/or grandchildren’s education, or leaving their legacy behind to a charitable cause. The most basic step in estate planning involves writing a will. Other major estate planning tasks include:
Establishing a guardian for living dependents
Naming an executor of the estate to oversee the terms of the will
Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
Setting up funeral arrangements
Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
Setting up a durable power of attorney (POA) to direct other assets and investments